Major Changes to FHA in 2013 To Effect Home Buyers

Big changes are coming in 2013 for FHA. The first change is that upfront MI (mortgage insurance) will go from 1.75% to 1.875% on January 1st. On a $200,000 loan, instead of $3500 being added to the loan amount for upfront MI the new amount will be $3750.

The second change is in regards to the annual MI. That goes from a current 1.25% to 1.35%. Again using the example of $200,000, the current monthly MI would be about $208.00 per month but go up to $225.00 per month after the change.

The third change relates to monthly MI as well. FHA has always allowed the borrower to cancel MI once their loan balance hit 78% of the original balance. No more! Monthly MI will remain for the life of the loan unless you refinance into a conventional loan. Under the current rule with normal amortization, the MIP would no longer be required in 9 years and 9 months. However, under the new rule, it would last for the entire 30 year term at about $225 per month using the $200,000 loan example.

Sometime in late January has been announced for the last two changes. If you are thinking of refinancing or buying a home and using FHA financing, it is very important to move on this immediately especially in regards to the lifetime of MI in your payment.

Do you have questions about FSH financing or buying a home?  Contact me and I will get the answers you need.  It’s still a great time to buy a house.  Knowledge is power.  Let me help you be powerful.